(BlockBar) Good news for startups that conducted initial coin offerings (ICO) years ago. They may be eligible for relief from potential enforcement actions by the U.S. Securities and Exchange Commission.
Director of Corporation Finance William Hinman said, in his opening remarks at the agency’s FinTech Forum in Washington, D.C., SEC, that cryptocurrencies are capable of shifting from being a potential security to very clearly not being one.
According to him: “Digital assets may evolve into an instrument that no longer. He cited an example of TurnKey Jets reassured the firm that the SEC staff would not recommend taking enforcement action against it. To be noted TurnKey Jets had secured a no-action letter earlier this year,
Hinman said that even if some aspect of the project was not fully developed, the SEC may have still been willing to provide no-action relief. He said:
“If they needed more relief on the secondary market for that token, that would not be outside the realm of a possible no-action letter.”
Hinman posed a hypothetical situation by taking this example a step further: What if a startup with TurnKey’s eventual model existed three years earlier, without a mature network or functional token? According to him, if this hypothetical startup sold its token, “in amounts that did not correlate to its use case but resembled funding,” that token would look like a security.
He also ensured that if three years later, that startup went to the SEC and showed that its token demonstrated utility aspects, the SEC may be willing to work with the company. He added:
“We’d likely be able to work our way through a no-action letter.”
Hinman also noted that the SEC’s actions to date have been conducted in accordance with its existing statutes and rules. “I mention this to show the flexibility of the regulatory framework we are working under,” he further said.
In view of Stephen Palley, an attorney with Anderson Kill who attended the forum, Hinman was indicating that a token which resembled an investment contract could turn into something akin to a utility token. According to Palley it was interesting to observe that the SEC has indicated towards using its framework to make this sort of determination.